India has imposed a 2 percent tax on the import of cut and polished diamonds effective immediately.
There will not be any impact on exports as most of the diamonds are cut and polished in India but in domestic market prices will go up by 2 percent, said Rajiv Jain, the chairman of Gem & Jewellery Export Promotion Council (GJEPC).
Industry officials said there may be some impact on demand initially, but later the business will go on as usual.
”It is a welcome sign according to me. It is good for the domestic industry and for the local manufacturer also,” said Sanjay Kothari, the vice chairman of GJEPC.
One local manufacturer, who requested anonymity, said the introduction of the import tax on polished diamonds may also help curb the widespread practice of round-tripping, whereby companies seek to boost turnover by the frequent import and export of the same diamonds.
“Some people started taking undue advantage when the government removed the import duty on polished diamond a few years back,” he said. “I think there will be some break to these transactions now and this is good for those who do genuine business.”
For the first 11 months of 2011, India’s polished diamond exports rose 13 percent to $25.514 billion, while polished imports grew 31 percent to $18.815 billion, according to provisional data from the GJEPC.
The government also fixed the import tax on gold at 2 percent of its value from the earlier flat rate of INR 300 per 10 grams. On Silver, the import duty has been set at 6 percent of its value as against INR 1,500 per kilogram earlier. On platinum, the government imposed an import tax of 2 percent.
“Due to this import tax, gold prices have already risen and there will be some impact on demand,” said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation (GJF). There may also be some problem in duty calculation due to continuous fluctuation in gold prices, he added.
With respect to the excise duty, a type of tax charged on goods produced locally, the government fixed the tax on gold bars at 1.5 percent of its value and at 4 percent on silver.